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S&P 500 valuations are stretched. Exactly how stretched? And what should we infer about future returns?
In this 6-minute video Adam Butler introduces a simple but novel innovation for modeling equity market valuations. There are reasons to believe average valuations should rise through time in response to changes in market structure. We discuss the conditions that might lead to higher valuations through time, and present a model to account for it. Viewers might be surprised at what we find when we analyze current valuations through the lens of this new model.
Click here to watch the video.